Battle for Tripoli Continues; Jobs Void; Fed's Next Move; Diageo Cheers Earnings; Buffet Buffers The Market With A Bailout Of Bank Of America; Apple May Not Be The Same Company Post Steve Jobs, But It Can Still Be A Great Company, According To A Former Apple Evangelist

Aired August 25, 2011 - 14:00:00 ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

And the Apple doesn't fall too far from the tree. The message from the man replacing Steve Jobs.

I'm Richard Quest. I mean business.

Good evening.

Investors are slamming on the breaks and this week's rally seems to head straight into a brick wall. The volatility of last week is back and traders wait for word from Jackson Hole in Wyoming. That is tomorrow, on Friday. The Fed maybe working on some kind of solve for the battered American economy. Don't forget it is at Jackson Hole where Ben Bernanke will give his speech to central bankers.

Anxieties return to Europe. We had been on course for share gains until later in the afternoon when the main markets suddenly ditched into the red.

Join me in the library and you will see what I mean. What had been a relatively encouraging session suddenly turned turtle and went rather unpleasant. Look at the numbers while I tell you what was behind them. Rumors that Germany will ban short selling, worries over AAA ratings. Three main ratings agencies said there was no update on Germany's AAA. So that seems to be holding for the moment. However, France did extend the ban on short-term selling. And we also know today that because of worries about what is happening in Greece, Greek bonds once again roared up over 18 percent, 17 percent, which were at a Eurozone high. So a down day, particularly for the German market, and without any real justification.

But this is what is happening in New York at the moment. We are holding at 11,000, just. The market is clearly deeply worried about what may happen the Allan-not Allan Greenspan-Ben Bernanke-showing me age-gives his Jackson Hole speech to central bankers tomorrow. He used it as a drop, to drop hints about QE2, this time last year. And the thinking is if there is to be QE3, this would be an opportunity either to confirm or to stop the rumors. And that seems to be what is driving this.

There was a fascinating bit of boosts to moral from Warren Buffet, who is making a $5 billion investment into Bank of America. He's doing it by preferred shares, which will pay a 6 percent dividend. There is also an equity conversion into it. Buffet says that Bank of America is strong and well led. The shares surged more than 20 percent in early trading. Warren Buffet's investment is a confidence, of voter confidence in the company. Right now the shares are of course at 9 percent at Bank of America.

CNN Money's Poppy Harlow joins me now.

Warren Buffet bought into GE. He bought into Goldman Sachs. Of course, I forget to say core moment, join the crisis. Why is he doing this now?

POPPY HARLOW, CNNMONEY.COM, CORRESPONDENT: In one word, "confidence". This is a clear sign of confidence in one of the biggest banks in the world. And this is a classic Buffet move, Richard. Let's go all the way back to 1964. His investment in American Express. It is all about, get in when others are getting out, and when there is not confidence in a company. He did it again with GEICO. He makes moves when others are moving away. You look at Bank of America stock, down some 50 percent this year alone, taking a huge hit. Rumors surrounding whether there would be a takeover of Bank of America; whether the bank was strong enough to stand on its own two feet.

In swoops Warren Buffet with $5 billion, a very sweet deal for him. Very similar to the GE deal. Very similar to the Goldman Sachs deal. It is also, I think, Warren Buffet saying that he does not believe that the U.S. government would allow Bank of America to fail. He's going to make a 6 percent dividend. He is a long-term investors. He's not going to try to get out of Bank of America any time soon.

I don't know that he is calling the bottom on this stock, Richard. If you look back to his investments in GE and Goldman Sachs, in 2008, they fell for a few months following his investments.

QUEST: Right.

HARLOW: But he is saying that he has confidence in the fundamentals of the company.

QUEST: It is always cause and effect, though, isn't it, with Warren Buffet. Does it recover the company because Warren Buffet, by his very force of being the "Sage of Omaha"? Or is it the other way around? Actually, he his the sage, he does spot something that is good. Which is it, Poppy?

HARLOW: It is a very good question. I think it is not clear yet, Richard. Because the outstanding issue here is how bad are the mortgage related problems for Bank of America? Granted Warren Buffet said to the public that he believes this is a fundamentally strong company. But even Warren Buffet doesn't know how bad the mortgage-related issues are for Bank of America. How many more lawsuits this bank might face? The big lawsuit coming just a few weeks ago from AIG on mortgage-related issues. That is really the cornerstone of all of this.

But I will tell you, Richard, Warren Buffet is not the first one to see this in Bank of America. Dick Boveau (ph), the very well-known banking analyst, this week out with a note saying, you are crazy, basically, not to buy into these banks. If you look at Bank of America alone, and look at the numbers, the stock was selling at a 45 percent discount to book value. If you look at the cash on hand and the liquidity position of these banks, and you look at that related to where the stock is, not just from Bank of America, across the board for financials. It just makes sense to buy into them at these levels. But again, it is going to take a long time for the mortgage-related issues to play out here for Bank of America. This is a huge boost of confidence.

But, you know, what? It was up 25 percent and it is only 9 percent right now, Richard.

QUEST: Poppy Harlow in New York. We thank you for that. Let's go back and look at the markets just momentarily. That was a Buffet move. But of course, we had the down 130. I've reminded you what happens with the European markets, they were off very sharply, particularly Germany. There are worries about what is happening in Germany. And we have this Fed speech by Ben Bernanke, which takes place tomorrow. And we need to consider that.

Christian Schulz is the senior European economist at Berenberg Bank, with me now.

Good evening to you.

CHRISTIAN SCHULZ, ECONOMIST, BERENBERG BANK: Good evening.

QUEST: So, first of all, let's get straight to brass tacks. Do you think Bernanke, tomorrow, is going to give us anything that we can hang our hat on, on the future of QE3, or not?

SCHULZ: Well, hang on your hat? I don't know. I think he might say it is still an option. But I doubt that he would say we will have it and it is going to be this many 100 billions, or this-

QUEST: No. But if I remember last year there was a-we came out of Jackson Hole pretty much knowing that it was on the agenda. And all we really had to do was wait for the right moment for him to fire the gun.

SCHULZ: I think it is different these days. We have higher inflation. We have better growth than we had last year. So the bar for a QE3 is very high. And political resistance in the U.S. seems to be very strong, too.

QUEST: Christian, what on earth happened in Europe today? I mean, we had this rumor that Germany was about to loose its AAA which came from nowhere. We had all sorts of things, and then the market just turned turtle.

SCHULZ: Well, one of the things maybe that there was speculation that there would be a short-selling ban in Germany. We have short-selling bans in France and other countries in Europe. This might have started this way, with selling we have seen in Germany. The rumor on the downgrade for Germany seems to be very far-fetched, to say the least.

QUEST: (UNINTELLIGIBLE) to the point of ridiculous. But on the short selling, again, we-the short selling in certain countries, like the (UNINTELLIGIBLE) countries and in France, was extended. Germany still not staying on the side. What happened, do you believe, in the fundamental strength of Euroland at the moment?

SCHULZ: Well, Euroland has many good things in place now. The ECB is buying the bonds of Italy and Spain. There are some things which work well-

QUEST: An extraordinary number by the way. I saw last week's number. It is something 14, 15 billion euros.

SCHULZ: And 22 before that.

QUEST: And 22 the previous week.

SCHULZ: Yes.

QUEST: So, you are up to nearly 50 billion, 40 billion, of bonds. How long can they keep buying that?

SCHULZ: Well, theoretically they could do this forever. But obviously, the risk rises and the political resistance rises. So they are probably going to do it until the Europeans have approved the new rescue shield (ph) with the new powers.

QUEST: But what that tells me is, that effectively, far from supporting the market for those bonds, the ECB is the market for those bonds.

SCHULZ: It is true that they are the one big buyer. We don't know if there are any others out there. There are many sellers, obviously, otherwise they wouldn't get the money. But, yes, they are in a sense making the market, which is worrying, of course.

QUEST: Because they have to get rid of those bonds off their balance sheet at some point.

SCHULZ: Eventually.

QUEST: Final question: Look, it may sound troubling (ph), but where would you now but the risk of a double-dip recession, for Euroland?

SCHULZ: For Euroland, and for the rest of the world, we have a 45 percent probability.

QUEST: Wow. 45?

SCHULZ: That is very close to 50 percent, yes.

QUEST: On Euroland?

SCHULZ: Yes.

QUEST: That is pretty high. I thought you were going to say lower than that.

SCHULZ: Well, it is high, but you have to really see the connections in the world of course. If the U.S. goes into recession, then many countries-

QUEST: What is the number on the U.S.?

SCHULZ: Well, it is also 45 percent. But if the U.S. goes into recession, the major economy, Germany, is likely to go into recession as well.

QUEST: Christian, many thanks, indeed.

The world's biggest tech company lost its celebrity chief executive as Tim Cook steps into Steve Jobs, job, we'll ask if Apple's fruit can remain as sweet.

(COMMERCIAL BREAK)

QUEST: The boss of Apple says the company still has a bright future, with or without Steve Jobs. Chief Tim Cook has taken over as chief exec after Mr. Jobs said he could no longer meet his duties. Jobs is staying on as chairman of the company, which he created. And whose success is so closely tied to his own genius.

It is not as if he's handing over the company to a complete unknown. Cook has been, in fact, in command since January when Steve Jobs took medical leave. In an e-mail to the employees, Cook said nothing will change at Apple. He says, Steve built a company and culture that is unlike any other in the world. And we are going to stay true to that. He went on to say I'm confident our best years lie ahead. Now that echoes, I'm confident our best years lie ahead, echoes the eight-sentence resignation letter from Jobs, who said Apple's brightest and most innovative days are ahead. CNN's Dan Simon joins me now from Apple's headquarters in Cupertino, California.

Dan, they've known that Steve Jobs was a perhaps, unwell, and that this might happen. But the signing of the letter of resignation, how has it been taken?

DAN SIMON, CNN CORRESPONDENT: Well, I think it caught a lot of people off guard. You know, as you said, we've known he's been sick for quite a long time. But this was pretty sudden. You know, this just happened on a random afternoon, and we really had no indication that this was going to occur. According to one Apple employee, this really came out of left field.

The good news is Apple has had this succession plan in place, it seems, and Tim Cook, a very well-regarded Silicon Valley executive. He has been at the helm as you said, basically since January. And he's done a fantastic job. If you look at Apple as a company, if you were ever going to step down from a post such as CEO, now is the time to do it. Apple has $76 billion in cash, the world's most valuable technology company. If you look at their market share, when it comes to tablets, a category they basically invented, 74 percent market share in tablets, and in smart phones. Their market share keeps going up. They now basically have a third of the market share when it comes to smart phones, Richard.

QUEST: OK, but whatever the consumer, look, in the consumer blogs and all the consumer articles may talk about how Apple is one man, and how Apple is the-Steve Jobs is the brains and the ideas behind it. But where you are, Dan, they are a little more savvy, that they are the tech industry. Do they believe that Steve Jobs leaving has a detrimental long- term effect?

SIMON: You know, I think it really remains to be seen. You know, you certainly loose intangibles. You know, the guy who goes up on the stage and gives these unbelievable keynote presentations, and really the attention to detail when it comes to product development.

Look, they have a great product guy. His name is Jonathan Ive. He is probably the best in the world when it comes to designing products. But Steve Jobs, with his attention to detail, he had a hand in everything. I read something in "The New York Times" today, Richard, that you know, the headphones, when it comes to the iPhone, this little clasp right here? You know that grips the two wires together? Steve Jobs had a hand in that. If you look at the MacBooks, the laptop computers? The power brick, Steve Jobs had a hand in it. Tim Cook is not that guy. Tim Cook is an operations person. He made sure that all the components were in place when it comes to building these devices and made sure that the balance sheets look good but when it comes to attention to detail, looking at every aspect of the product. We're going to miss that with Steve Jobs.

QUEST: Dan Simon, who is in Northern California for us tonight.

Apple's products can instill almost religious fervor in the company (UNINTELLIGIBLE) Guy Kawasaki's job, his title was the software evangelist when he worked at Apple's in the 1980s.

Mr. Kawasaki, was a key player early days, and again, in the mid-90s. He joins me now from Stanford University in California.

And Guy Kawasaki, just give me-you know, I'm going backwards and forwards on this, all day. Is Steve Jobs leaving, you know, the-an irrelevance for Apple? Because Apple is so many people? Or is it the sword of Damocles and the worry of the company?

GUY KAWASAKI, FMR. CHIEF EVANGELIST, APPLE: You know what, honestly, it is to be determined. I think he has injected so much DNA and he practically approves every employee hire, that you could say he has ensured a legacy at Apple that can go on for years. In real tactical terms probably the product pipeline for the next two years has already been determined. So the question becomes what happens after that?

QUEST: Right, but-

KAWASAKI: And that is to be determined.

QUEST: But, Guy, the mere fact that you cannot-or anybody cannot sort of say with a certain degree of certainty, that he is not the be all and end all, is a worry for the future of Apple.

KAWASAKI: Well, you know, I can't build a case that it is a good thing. On the other hand, we just don't know. I mean, you know, Tim Cooke could do a great job. Jonathan Ive could step up, you never know, you just never know. We will see. In the meantime-

QUEST: Talk to me about the way in which Steve Jobs is so involved in what some might describe as the minutia.

KAWASAKI: Yes.

QUEST: I mean, Dan Simon is talking about clips and bricks, and power supplies. Is that your experience?

KAWASAKI: Oh, absolutely. I mean, Steve Jobs would determine what the trash can icon looked like in the first McIntosh. He is truly a perfectionist. And the beauty of this is that you had an autocrat who was a perfectionist, who had great taste. And that is a very unusual, if not unique combination. The next person who has to make that call, will he be- I mean, the autocrat part is easy. I mean, you can get that by caveat. But will he have the perfectionism and the taste that is the question.

And if there is not an autocrat, if he becomes a committee, so you know in the old days, if Steve said the trash can looks like this, that was the end of the discussion. In the new days, post-Steve, does it become a committee? Do, you know, does a whole group of people vote. Do they conduct market research and they ask consumers which trash can do you like? That is the danger, I think.

QUEST: All right. I'm going to go out on a limb here. I'm going to just-and you can tell me if I'm completely up the wrong tree, I'm barking mad. But I think we all know the answer to that. I think secretly, and privately, we all are saying, Apple without Steve Jobs, is not the same company.

KAWASAKI: Well, it isn't. But that doesn't mean it is not a good company. Right? I mean, I still love going to Disneyland. Walt Disney isn't there anymore.

QUEST: No, but it took a Michael Eisner to put Walt Disney back where it-after decades of decline. But I take your point on board. Guy, you and I will talk about this more in the future.

(LAUGHTER)

Thank you for joining us.

KAWASAKI: All right. Thank you.

QUEST: I love the phrase. Absolutely summed it up perfectly, "an autocrat who is a perfectionist, with great taste", sums it up in a nutshell.

(DESK BELL CHIMES)

Look at this, over here. This is the price of gold. The gold price roared up and in the last couple of days, has fallen back dramatically, loosing more than $200. Well, all in one week alone. Ali Velshi and I will be talking about all that glitters in "Q&A" after the break.

(COMMERCIAL BREAK)

QUEST: QUEST MEANS BUSINESS and so does my good friend, Ali. We are together in the CNN NEWSROOM, and, of course, around the world.

A good day to you, sir.

ALI VELSHI, CNN ANCHOR: And to you. Each Thursday Richard, we come to our viewers around the world, talking business, travel, innovation. Nothing is off limits. So today we're talking about gold.

QUEST: Indeed. We got this question from one of our viewers who sent us via Twitter who wrote: Please tell me how to deal with my wife who insists we should buy gold now. Ali? You go first, 60 seconds. Give this gentleman some advice.

(DESK BELL CHIMES)

VELSHI: Any opportunity to use gold again. And, Richard, since you've barred me from using this on the screen, here is the other side of the coin. There is nothing wrong with keeping a certain portion of your portfolio in precious metals, as long as it's based on your own personal risk tolerance. Don't go buying up the bling now just because you're feeling uncertain about the economy.

Remember, gold trades, too. It can go up, and it can go down. It happened with silver back in late April. Prices tumbled 30 percent in just four days. And silver actually gets used for stuff. So it's possible that gold has plenty of upside; some analysts seeing it going to $5,000 an ounce or higher in the next few years, could go the other direction, too. So if you want to keep gold, or buy a mutual fund with exposure to gold as part of your portfolio it's a reasonable bet any investor can make. But if you're looking for a golden ticket, there are no guarantees in the commodity world, and this coin could end up taking a bite out of your hard- earned savings.

(BUZZER SOUNDS)

QUEST: Oh, the old -- the old props are the best. All right.

Yes. Here we go. Three, two-(DESK BELL CHIMES)

Good, sir, your wife is getting excited because the price of gold is up sharply, more than 50 percent since the beginning of the year; 150 percent over the crisis, and for good reason.

Gold is a commodity that has always been prized because it is so rare. For centuries it's been used as a hedge against inflation. If you had invested in gold in 1991, you would have gained more than 200 percent. The stock market would have only have given you 150 percent. Central bankers have been buying gold, and taking your wife's advice, Thailand, Mexico, Russia, all believe to have added to their reserves, as debt makes paper money worthless.

But warn your wife: Gold is not the be all and end all investment. Timing is everything. In the '90s, the prices roared up only to collapse later in the decade. Ultimately, what your wife is really asking for is one of these; a nice piece of gold necklace.

(BUZZER SOUNDS)

QUEST: Rather than any other sort of gold. Buy the gold and she will be smiling.

VELSHI: Touche. I didn't know you were allowed to stand up, by the way and use visual aids. I didn't think that was in the rules. But you know what, it's not about that, Richard. Its not about my props or your visual aids, it's about what we know. Let's bring that "Voice" in to separate the men from the boys.

Hello, Voice?

UNIDENTIFIED MALE: Hello, gentlemen. Let's jump right in. Question number one. According to the World Gold Council, which country produces more gold? Is it, A., Australia; B., Ghana; C., Russia, or, D., the United States?

(DESK BELL CHIMES)

(BELL DINGS)

Richard?

QUEST: Yeah. It's Australia.

(BELL CLANGS)

UNIDENTIFIED MALE: That is correct. Australia tops this list, producing the third largest amount of gold in the world, but South Africa leads the list. In fact, half of all gold ever produced has come from South Africa.

Question number two: To meet the "good delivery" specifications set by the London Bouillon Market Association, what percentage of gold must a gold bar have? Is it A., 99.5 percent; B., 97.5 percent; C., 95.5 percent; or, D., 100 percent?

(BELL DINGS)

(DESK BELL CHIMES)

UNIDENTIFIED MALE: Ali?

VELSHI: A., 99.5, 99.5 percent, A.

(BELL CLANGS)

UNIDENTIFIED MALE: That is correct. A "good delivery" gold bar must be at least 99.5 percent gold. As any good financial expert knows, "good delivery" bars are notable for both their large size and high purity. We're all tied up. Let's go to question number three.

In the '80s, a song titled "Gold" was a top 10 hit in the U.K., New Zealand and the Netherlands, as well as a top 30 hit in the U.S. The song contains the longest held note by any male vocalist in any song released in that decade. Who charted this single in 1983? Was it, A., Terrance Trent Darby; B., Aha; C., Rick Astley (ph) or D., Spandau Ballet?

(DESK BELL CHIMES)

Richard?

QUEST: Spandau Ballet.

(BELL CLANGS)

UNIDENTIFIED MALE: That is correct. "Gold" was Spandau Ballet's second biggest hit. It was the follow up to their biggest hit, a little ballad called "True". And I know this much to be true. We are done for the week. Congratulations, Richard.

QUEST: That will do for-

VELSHI: Thank you, Voice. Richard, that was an unfair advantage because I wasn't born yet.

QUEST: Oh. I'm not even going to go to that particular point. Ali, that will do it for this week.

VELSHI: And in the CNN NEWSROOM, 2:00 p.m. Eastern. Keep the topics coming, by the way, on our blogs, CNN.com/QMB, and CNN.com/Ali. Tell us each week what you want to talk about. See you next week, Grandpa.

QUEST: Oh, good-bye, kiddo.

Now today's "Q&A" of course started with a Tweet when from Kanami Ogawa (ph) about what advice would I give to his wife, who wants to buy gold. And there is the lovely lady. We have Rico (ph), Kanon (ph), Yuma (ph), Kakuto (ph) and Harae (ph). A sweet family and I see what you mean and I think she needs a little bit of gold. More after the break.

(COMMERCIAL BREAK)

QUEST: Hello. I'm Richard Quest, QUEST MEANS BUSINESS.

This is CNN. And on this network, the news always comes first.

A confusing day, indeed, in terms of determining Moammar Gadhafi's whereabouts. After a day of rumor and counter-claims, we heard a recorded message a few hours ago supposedly from Gadhafi. He sounded in a defiant mood. He called on his supporters to go out into the streets and fight. That was after a rebel commander told CNN Gadhafi may be holed up in buildings close to his old compound in Tripoli. Rebels previously thought they had him surrounded, but those reports were proven to be incorrect.

Another rebel commander said Gadhafi may have been inside a convoy leaving Tripoli on Tuesday night.

Meanwhile, the fierce fighting between loyalists and rebels is continuing across Libya's capital.

The latest now from Tripoli.

CNN's Dan Rivers is there and joins me now.

Let's begin, first of all, the -- the message from Gadhafi, is the feeling there that it is him.

And, if so, what effect is it having on people?

DAN RIVERS, CNN CORRESPONDENT: I -- I think it's fairly clear it probably is him. It sounds like him. But when it was recorded, we don't know. Where, we don't know. The timing was interesting, though, Richard. The -- the message came out almost simultaneously that we were getting these rumors that he had been, according to the rebels, cornered in some apartment blocks in the city.

Now, I don't know whether that was just a coincidence or a deliberate attempt to sort of wrong foot the rebels by Gadhafi's sort of media operations team. But the rebels' claims so far have not been borne out, it must be said. My college, Nic Robertson, has -- has been down toward the scene of where that sort of battle was going on. No sign, really, that -- that they had kind of surrounded an apartment block.

I don't know, I mean it -- it's very confusing here, Richard, to try and nail down these -- these rumors. But as far as we're aware, that, you know, this is just a rebel claim from one commander. And they've been wrong about things in the past, for example, the -- the capturing of Saif al-Islam, Gadhafi's son. That turned out not to be true.

Yesterday, they told me that they thought they had Gadhafi in a different part of the city. That turned not to be true. There's nothing at the moment that suggests that this latest claim is true. We have to wait and see, obviously.

As you can see now, it's night. We get the impression that the fighting is -- is calming down a bit. There's certainly a lot less gunfire around here, where we are, near the port.

But in terms of the message that he gave, we simply don't know either whether that is an old recording that's -- that's being trotted out now, whether he was speaking, you know, today, or whether, you know, this is something that they -- a desperate last attempt by his media team to give the impression that he is still the leader of this country.

QUEST: Dan Rivers in Tripoli this evening.

The other headlines tonight, Hurricane Irene is battering the Bahamas and the storm is expected to reach the U.S. East Coast by Saturday. The governors of North Carolina, Virginia and New Jersey have declared states of emergency. Evacuations of towns and cities has already begun on some of North Carolina's barrier islands.

We'll have more on this, of course, in the weather forecast at the top of the hour.

Apple's stock dipped today on the news that Steve Jobs has resigned. He's to be replaced by -- as chief executive by long-term Apple exec, Tim Cook. And Jobs stays on as chairman of the board.

Apple's value has rocketed over the Steve Jobs' tenure, since he returned to the company some 14 years ago.

Join me at the super screen and I can show you. It's fascinating. This is a 10 year chart showing the, if you like, the rise of the share price under Steve Jobs. It's risen some 4,000 percent, to the point where it actually became the most valuable company.

Let's start, first of all, back in 2001. We have the iPod. We all loved our iPods. It was the first of its kind.

That was quickly followed by the -- by iTunes. Now, iPod and iTunes don't really have much of an effect on the share price. However, in this period, suddenly things really start to move on. We have the iPhone which comes along. And then we have a dip in the share price, quite a dramatic dip here. That's where Steve Jobs goes on medical leave. But proving that you have this pipeline from iPod, iPhone, right the way through to iTunes, you get this dramatic rise in price, as iPhone 4 comes in and the iPad comes on stream and the share price rockets up.

This here is the result of the revenue stream from this, this, this and this -- a collective of products that lead to this dramatic share price.

Of course, Apple's products have scored very highly and enthusiastically with members of the public, who have been known to cheer, applaud and even shed tears as he unveils these different products.

Let's take a look back at some of Apple's most memorable reveals.

(BEGIN VIDEOTAPE)

STEVE JOBS, CEO, APPLE: What is iPod?

IPod is an MP3 music player, has CD quality music and it plays all of the popular open formats of digital music. But the biggest thing about iPod is it holds 1,000 songs. Now this is a quantum leap, because it's your -- for most people, it's their entire music library.

Today Apple is going to reinvent the phone, an iPod, a phone...

(LAUGHTER)

JOBS: -- and an Internet communicator. An iPod.

(LAUGHTER)

JOBS: -- a phone...

(APPLAUSE)

JOBS: Are you getting it?

And the question has arisen lately, is there room for a third category of device in the middle, something that's between a laptop and a Smartphone?

And, of course, we've pondered this question for years, as well. The bar is pretty high. In order to really create a new category of devices, those devices are going to have to be far better at doing some key tasks. And we call it the iPad.

(END VIDEO TAPE)

QUEST: Steve Jobs is more than just a chief executive, some say -- visionary, front man and one off.

Now he steps down, what happens within the Silicon Valley's headquarters?

Rosabeth Kanter is a professor of business administration at Harvard Business School.

Professor Kanter is also the author of several books.

But I think what's most important about Professor Kanter, she can help us understand the principle of change that's going to take place.

What happens, Rosabeth Kanter, when companies have such an idiosyncratic, such a personality-led cult of leader, when they change?

ROSABETH KANTER, HARVARD BUSINESS SCHOOL: It certainly makes it hard for whoever succeeds him. So no matter how smooth this transition, how long in advance Steve Jobs knew that he was ill and he would have to step down, it doesn't matter. Whoever follows him is going to be held to a higher standard, is going to have trouble moving up to this, will be coasting for a while on all the great products, but will be judged by a standard that he couldn't possibly live up to, to be inspirational and imaginative.

QUEST: If that is right, and you've obviously got the background of history, when this has happened before, has the company usually lost its way or are there any notable examples you can think of where a company did have such a strong leader that does change?

KANTER: I think that it's going to be bumpy for a little while, although Apple has a tremendous product portfolio, so they'll coast on momentum. But then, the question will be the next breakthrough. And given that Google and many other rivals in Silicon Valley, are, A, going to try to poach Apple's people as quickly as possible -- that's one of the things that happens -- that they will find that many people will be listening to offers that might not have listened before. So that may strip Apple of some talent. I don't know. I mean Apple has really great talent.

And then they are already innovating and so Apple, while it dominates the markets that it invented, is no longer alone in those markets.

So the question will always be, what next?

And because investors get a little nervous, they want sure things, I can see that it's going to be a little hard for Apple and they're going to have to work harder to establish the fact that, A, Steve Jobs still has an invisible hand on the till as chairman, and they're going to have to work harder to establish that Apple still has magic. They'll need a little Harry Potterism in Apple now.

QUEST: Do you find it slightly odd, though, I mean as a -- as a professor of management who's -- who's looked at it, do you find it odd that a company of 40,000 odd people and you and I are sitting here discussing whether one man makes that much difference?

KANTER: Well, the culture of the charismatic leader is certainly exaggerated a little. But in a company that, first of all, he co-founded, so it's got much of his -- of his own imagination in its history throughout, it's very hard to go beyond the founder. Many companies flounder. And, in fact, it's why many tech companies have seen the founder return later and try to restore those moments of former glory.

They don't always do it, but Steve Jobs came back and, in fact, he did reinvent Apple. But there are other people who have come back -- Ted Waitt came back in Gateway and where is Gateway now?

Nobody has even heard of it. They come back and try to make it the way it was when they founded it. Larry Page is back in as CEO of Google. Now he's a more mature Larry Page. But in -- it's -- it's temptation. It's hard to get beyond the founder. I think it's especially true, this cult of charisma around founders.

And when founders are as brilliant and imaginative as Steve Jobs, I mean I have enormous admiration for him. Even though he's built a great company of 40,000 people, its leadership actually matters.

QUEST: Leadership matters.

Many thanks, indeed.

And thank you for joining us and helping us understand this interesting and difficult time.

Rosabeth Kanter, professor of management, joining us there via Skype.

Now, we must warn you of some strong language in a few moments, language that's immoral, treasonous and irresponsible.

And would you believe it's all pointed at this chap, the, of course, head of the Federal Reserve?

Next, we'll look at how campaign trail name-calling is putting P.R. on Ben Bernanke, in a moment.

(COMMERCIAL BREAK)

QUEST: It was exactly this time last year that Ben Bernanke paved the way for a second serving of quantitative easing, QE2. At the annual Federal Reserve symposium in Jackson Hole, Wyoming, he talked of providing unconventional measures to support the recovery again. He's opening this year's event tomorrow.

As Maggie Lake now reports, with the presidential campaign underway, unconventional might be off the menu this time around.

(BEGIN VIDEOTAPE)

GOV. RICK PERRY (R), TEXAS: Thank you much.

MAGGIE LAKE, CNN BUSINESS CORRESPONDENT (voice-over): It was the comment that took the U.S. political world by surprise.

PERRY: Printing more money to play politics at this particular time in American history is almost treacherous -- or -- or treasonous, in my opinion.

LAKE: With that, Texas governor and Republican presidential candidate Rick Perry put Ben Bernanke on notice. A big new stimulus program for the American economy, another round of quantitative easing, will be met with heavy fire on the campaign trail.

But many believe Perry went way over the line.

BRUCE BARTLETT, FORMER WHITE HOUSE ADVISER: To the extent that he has people thinking that the Fed doing its normal job is somehow or other a treasonous act is -- is grossly irresponsible and to the extent that people think that Perry knows what he's talking about, it does put a constraint on the Federal Reserve to be able to be more aggressive.

LAKE: Perry is not the only political figure to rail against the Fed. Presidential candidate and Republican presidential candidate, Ron Paul has been the Fed's bete noire for years. His blunt talk gets standing ovations on the campaign trail.

REP. RON PAUL (R), TEXAS: It's a deliberate policy of the Federal Reserve to depreciate the currency. That's what their business is. That is why our dollar, since 1913, has lost 98 percent of its value. That's dishonest. It's immoral. It's unconstitutional and the reason why we ought to get rid of the Federal Reserve.

LAKE: The possibility that increased political scrutiny could stay the Fed's hand, even as risk for a double dip recession deepen, is troubling to many.

The president of the Federal Reserve of Dallas, Richard Fisher, says, quote: "We are going to do what's right. We are indifferent to political criticism."

But many Fed watchers say Bernanke and company do worry about how they are perceived.

VINCENT REINHART, AMERICAN ENTERPRISE INSTITUTE: They worry about their reputation. They worry about their political legitimacy. And if key politicians are criticizing you, you have to think twice about what you're doing.

LAKE: That said, some Fed watchers still believe Bernanke will pave the way for some kind of quantitative easing at Jackson Hole this Friday.

REINHART: We're kind of like we were last year at the same time, where the Fed's forecast was being marked down, the unemployment rate was high. Eventually, the Fed acted. And I think they'll do it again.

LAKE: Vince Reinhart says one thing you can predict, Ben Bernanke will take the political heat no matter what he decides to do in the months ahead if the U.S. economy weakens further.

Maggie Lake, CNN, New York.

(END VIDEO TAPE)

QUEST: In the last few moments, reports now coming from the Reuters News Agency saying that JPMorgan Chase is to pay $88 million to settle allegations of apparent sanctions violations. According to this, it relates to sanctions relations to Cuba, Iran and Sudan. No further details on what happened, but that's what the story is.

In a moment, Diageo, the drink company, won't let it rain on its parade. Diageo beat the bad weather and boosted profits. The chief executive, in a moment.

(COMMERCIAL BREAK)

QUEST: As long as the drinks industry has results to cheer, Diageo, which is behind brands like Guinness, Smirnoff and Captain Morgan's, has reported a 17 percent growth in profit for the year, with strong sales in emerging markets. Diageo's shares rose more than 4.5 percent. It comes as disappointing results from Heineken on Wednesday. Heineken blamed the struggles on bad weather and the summer in Europe.

Whatever the weather, Diageo managed to defy the trend.

Earlier, I was joined by the chief executive, Paul Walsh, who I asked how it beat the problems that affected rivals.

(BEGIN VIDEO TAPE)

PAUL WALSH, CEO, DIAGEO: Well, it's interesting, when the recession started to bite in 2008, we made the commitment at that point in time that we would continue to grow our business and we'd continue to invest and we would emerge a stronger business. I think what has helped us during this period is that we've continued to invest behind our brands. We've continued to invest in capacity in the emerging markets. And we've continued to build our business in these fast growing markets of the world like Africa, like Latin America and Asia.

And therefore, even though we have seen softness, particularly in Southern Europe, the head space that we have created in the emerging markets more than offsets the problems of Southern Europe.

QUEST: Is the company bifurcated in the sense that, as so many CEOs are now telling me, that they have a company that basically trades in mature markets with limited margins or -- or restricted margin growth and then the company that trades in the emerging markets, where is groom for -- room for margin growth and for greater profits?

WALSH: I think that it -- that is a bit overly simplistic. There is no question that in the fast growing markets, you are seeing double digit top line growth. You are seeing more and more mdcc consumers coming to our franchises, our brand equities. And, therefore, the growth prospects are very exciting.

I think to many people brand Europe as a low growth market, whereas, in fact, Europe is quite polarized. I mentioned a moment ago, if you look at Southern Europe and you look at Ireland, yes, we shouldn't be surprised to see contracting consumer demand. You've got economic issues and you've got a bit of a crisis of consumer confidence in those markets.

However, elsewhere in Europe, things are fine. Germany is booming. Benelux Benelux is fine. The U.K. is OK. You know, we're not in high growth, but the U.K. is doing fine. Russia is very strong. And for us, we just announced a deal in Turkey yesterday, we closed a transaction of Mey Icki. Turkey is booming, as well.

So again, you've got this polarization. And we shouldn't brand Europe as no growth. There are markets in Europe where you can get growth.

The other thing I would say is that North America has started to come back. It is not at the growth levels that we enjoyed in 2007, but we are seeing growth. And I don't believe that is likely to change in the foreseeable future.

(END VIDEO TAPE)

QUEST: That's Paul Walsh, the chief executive of Diageo.

Now, the weather forecast. As North Carolina's governor is saying, we're preparing for the worst and praying for the best. It's Hurricane Irene. It's bearing down on America's East Coast.

Guillermo is at the World Weather Center.

We're going to go through this bit by bit, if we may -- Guillermo.

First of all, where is -- where is ii now and the effects?

And then take me through where she's going.

GUILLERMO ARDUINO, CNN METEOROLOGIST: You see, it's very next to Florida here, still over the Bahamas section. That's why we have hurricane warnings in effect, which means that within 24 hours, we will continue to feel the effects of hurricane conditions, that is, winds in excess of 120 kilometers per hour.

But in our case, it's a category three. So we're talking about 185 kilometers per hour with gusts that even get to 222 kilometers per hour.

So this is the beginning of the, let's say, light at the end of the tunnel for the Bahamas, even though they're going through citizens right now. But very soon, we will see the coast of Georgia here, South Carolina and later on North Carolina with the impact of the system, being North Carolina the one that is going to bear the brunt of it.

So I assume that many people are thinking, oh, great, let's go, summertime, we can take the surfboard and enjoy ourselves, those huge waves.

Not a good idea. But there are some that are going to do it. And you see, we expect like a double landfall, one in North Carolina. And we are talking about this weekend and especially on Saturday afternoon, evening hours. And then another landfall probably in the area of Maryland and Virginia.

Now, we are going to see, of course, a lot of winds associated with it, battering waves and significant rainfall. Some areas of the United States need the rain. But in this case, it comes altogether and all those coastal towns, because they have beautiful beaches over there, are going to be flooded, especially the -- the roads that go by the -- the beach. And also, remember, there are hou -- houses that are built there by the water and they are going to suffer, no doubt about that.

And this is just the beginning, I have to say, Richard, because we are talking about September being the busiest month of hurricane season. And this year, we expect, again, above average activity. So as an example what have happened -- and it's getting worse because the cyclone is intensifying, we say -- we have seen in Nassau, 161 kilometer per hour winds and in Georgetown, 111. It's getting worse. It's getting closer. It's going to be tough.

QUEST: Guillermo will be watching and we'll talk more about this tomorrow. And, of course...

ARDUINO: Of course.

QUEST: -- when there's more to report on it.

Come back straightaway.

Many thanks.

ARDUINO: Thank you.

QUEST: Now some very influential people were Tweeting on a variety of topics today. Let's go to, first of all, Tweets from the Top.

Nouriel Roubini, the NYU economics professor, he Tweeted, fascinatingly: "The U.S. likely in recession now. Home sales, initial claims starts permits, core capital expenditure, all these different things and regulatory fields."

All of that giving an idea of a recession.

AOL co-founder Steve Case Tweeted about Steve Jobs: "The post-Steve Jobs era -- entrepreneur whose job resembles most is Disney. He was just as obsessed and as visionary."

And Anand Mahindra, the vice chairman of the Mahindra group, has Tweeted, fascinatingly: "Compromise isn't always a bad word. It's part of the DNA of democracy. Hopefully, it will be on display in abundance in Delhi over the next 48 hours."

We'll be back with A Profitable Moment in a moment.

(COMMERCIAL BREAK)

QUEST: Tonight's Profitable Moment is really a forecast looking ahead to tomorrow night's program, that you won't want to miss.

Ben Bernanke gives his Jackson Hole speech, when we will, of course, have full coverage, as we analyze whether or not QE3 is on the horizon. That will be tomorrow night.